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What Percentage of Your Budgeted Fleet Dollars are Wasted?

How much of a fleet’s annual budgeted dollars are wasted? Is it 5 percent, 10 percent, or even more? If we are honest with ourselves, we would readily acknowledge that there are wasted dollars in all of our budgets and, in light of this, I’m reminded of the saying, “If you watch the pennies, the dollars will take care of themselves.” Typically, waste occurs because of non-compliance with fleet policy and, conversely, the lack of enforcement of it. Reducing fleet costs is a constant, never-ending struggle for all fleet managers, since every aspect of fleet management revolves around money. In lieu of additional budget dollars, one course of action is to stop the waste of existing dollars. There are a number of fleet-related areas where waste occurs. For example, how much money is wasted in unnecessary over-spec’ing of vehicles, keep-ing under-utilized assets on the books, or non-compliance with scheduled preventive maintenance intervals that result in unproductive downtime? Often, cost-reduction initiatives focus on operating expenses, but depreciation is a fleet’s largest annual expenditure. Are you maximizing the resale potential for all assets, whether sold at auction or to employees? Or, are your remarketing practices leaving money on the table?

Eliminating Waste is the ‘Low Hanging Fruit’In my mind, eliminating waste is the proverbial low-hanging fruit. At its most fundamental level, waste involves consuming resources through inefficient or non-essential activities. It is not just waste, but wasteful. The greatest amount of waste occurs with the fuel budget. If up to 30 percent of a vehicle’s fuel efficiency is impacted by driver behavior, you need to minimize this inefficient use of corporate assets. In fact, many of these be-haviors are in violation of fleet policy. Let’s start with one of the most wasteful of all fleet activities – unnecessary idling. Until the advent of telematics devices, unnecessary idling was not perceived to be a major problem for fleets. But, once engine data was captured by fleets on a large-scale basis via telematics, it quickly became apparent that idling represented a significant “hidden” problem. The amount of unnecessary idling varies by fleet, but some fleets have recorded idling as much as 35 percent of the time.

Besides unnecessary idling, there are many other ways that fuel dollars are wasted, ranging from inefficient routing to drivers not being price conscious when refueling. But, what about having drivers ensure that tires are properly inflated? Driving on under-inflated tires is not only dangerous, but wastes fuel dollars as well. This is the easiest, most cost-effective (and most neglected) way to boost fuel economy. For instance, keeping tires properly inflated increases fuel efficiency by 3 percent.

What about overloading? This also may be perceived as strictly a safety issue, but overloading is another way precious fleet dollars are wasted. Overloading shortens a truck’s service life and increases operating expenses. In fact, fleet maintenance surveys consistently show that overloading is the No. 1 cause of unscheduled maintenance for trucks. There’s a direct correlation between vehicle weight and fuel consumption. Every pound of extra weight requires an engine to work harder, increasing fuel consumption. For instance, an extra 100 lbs. in vehicle weight can reduce mpg up to 2 percent. In addition, every pound deleted from curb weight is converted into revenue-generating payload.

Scofflaw Drivers & Equipment AbusersVehicle violations represent 1-3 percent of total fleet costs. However, the total cost will vary by fleet depending on the cities and states where vehicles operate. This is an area ripe with waste. Some drivers are egregious in their violations. In my mind, vehicle violations are not the cost of doing business; it is a needless waste of dollars. Let’s target flagrant scofflaws and stop the waste. Speeding is a common moving violation. Reducing driving speed not only reduces violations, it also conserves fuel. For every 10 mph of speed reduced, fuel economy improves by 4 mpg.

Similarly, at-fault accidents are the ultimate form of waste, not only because of the expenditure to repair damaged assets, but also because it increases corporate liability exposure. Yes, accidents happen, even to the best of drivers, but often there is the lack of accountability. If one doesn’t exist, establish a fleet safety and accident committee to examine incidents to assess preventability and fault, with the ultimate goal to reduce the frequency of at-fault accidents, which, in turn, will reduce accident repair expenditures.

Waste Not, Want NotBefore implementing new fleet initiatives requiring new dollars, let’s make our No. 1 priority to stop the waste of existing dollars. The most effective way to reduce waste is to increase compliance with fleet policy. Fleet policy must be a powerful component of a company’s overall cost-control strategy.

Market Trends

While the light-duty market for compressed natural gas vehicles has almost evaporated, new near zero emissions technology and drastic reductions in infrastructure costs have reinvigorated the market for medium- and heavy-duty applications — even for smaller fleets.

A fleet cost reduction program goes straight to the corporate bottom line. If a company operates at a 10% annual net profit margin, reducing annual fleet expenses by $100,000 is the equivalent of generating $1 million in sales. Although fleet managers manage hundreds of thousands to tens of millions of dollars in corporate assets, only half are incentivized to achieve targeted performance goals. I advocate incentivization should be a universal best practice extended to all fleet managers.

I believe volume penetration of fleets by autonomous vehicles will take much longer to occur than what is predicted in today’s optimistic forecasts. Conceptually, autonomous vehicles are technologically feasible, but, as they say, the devil is in the details. One thing is certain, as we trail blaze new ground, so too will we trail blaze new problems.

Corporate mobility management to evolve into multi-level responsibilities for asset lifecycle management, administration of multi-modal mobility services, and deployment of productivity and safety tools to support a mobile workforce in the field.

The key objective of end-user discussions is to match the truck with the fleet application. Once you have completed your discussions, make sure the completed upfit specs have been reviewed and approved by all parties prior to order placement. It is critical to have a documented sign-off to avoid misunderstandings that result in after-the-fact upfitting modifications.

Recently, I conducted a survey of several hundred fleet managers to identify emerging industry trends. One recurrent theme expressed by fleet managers was the concern that fleet costs are starting to experience upward pricing pressures. Here's what they told me.

Over the years, I have known many competent fleet managers. But, like salmons swimming upstream, not every promising fleet manager survives the challenges and rigors of day-to-day fleet management. It is understandable when fleet managers are fired for making expensive mistakes or when caught engaging in ethical transgressions, but, sadly, many more are terminated for circumstances that are entirely avoidable.

Vehicle specifications should be defined by the fleet application and mission requirements. A truism in truck fleet management is to design a truck that will accommodate your operational requirements rather than trying to make your operation conform to the truck. Here's how you do it.

At a fundamental level, the fleet management industry is an aggregator of data upon which it executes actions designed to optimize vehicle asset lifecycle – from acquisition to disposal – and to fine-tune operational efficiencies to maximize employee productivity. A cognitive computing platform, such as IBM Watson, would thrive in this type of data-rich environment.

Can a branded vocational vehicle be ticketed for being parked in an employee driver’s home driveway? Or, can it be subject to a fine if legally parked overnight on the side of a street? Before you say no, think again. These discriminatory practices occur regularly when vocational vehicles are parked in residential areas governed by a homeowner association (HOA). In fact, the type of restrictions implemented against vocational or branded vehicles can run the gamut and are at the whim of the HOA.

The value of face-to-face meetings is beginning to be questioned by younger generation employees who have only known a world interconnected by the internet, social media, and FaceTime. In particular, they question the cost-effectiveness of traveling by car from point A to point B, its negative impact on corporate sustainability goals, the inefficient use of time lost behind the wheel of a vehicle, and more.

For many managers responsible for vehicle operations, fleet management is often one of several job responsibilities. These managers acknowledge that it is difficult to stay on top of changes in vehicle design, powertrains, onboard safety technology, telematics capabilities, and regulatory changes that impact fleet operations. Despite this recognition, a common mistake made by many of these managers is underutilizing the subject-matter expertise of current and/or prospective suppliers.

In the next decade, the term "fleet management" will soon become inadequate to fully define the scope of our industry and it will be viewed as an anachronistic label. Today's vehicle connectivity megatrend will be the catalyst of an expanded fleet business model focused on managing a new connected vehicle ecosystem. This fleet ecosystem will encompass not only the vehicle, but also the mobile workers and, more importantly, the work they performed and the tools they use.